In the latest chapter of Kohelet Economic Forum’s new chartbook, Eran Yogev and Nisan Avraham crunch the numbers on the economic state of the older population in Israel:
Main Findings
Although seniors are often popularly depicted as associated with poverty and low standard of living, the net income of older households is actually higher on average than younger ones.
There is great variation between the economic standards of living among different segments of the older population according to age and sector. The variation among different age groups stems primarily from labor income, whereas the variation among different sectors is mainly due to non-labor income, including capital income and pensions. The economic standard of living for older adults who emigrated from the former Soviet Union declines dramatically after their retirement from the labor market.
Policies aimed at reducing social gaps by increasing budgets without distinction for the entire older population may in some cases have the opposite effect and increase income inequality.
Demographic structure: Most of the persons in older households are aged 65 and older, with data showing that the head of a household’s age is representative of the household’s demographics, thus, households were measured by the head of household’s age, in line with common practice in the literature. Across all sectors, the number of household members tends to be lower in older households compared to younger ones, with the number in Haredi and Arab households higher than in other groups. These sectors also have a higher rate of young households.
Income and Expenditure: Older households have higher income on average than young households, with some variation within that cohort: Since 2015, households of 65-74 have the highest average. Income from labor decreases when the head of household is older than 65, and even more so at 75+. However, income from all other sources increases with age. The difference in economic living standards between older and younger households is also reflected in homeownership. Except for immigrants from the former Soviet Union, the homeownership rate is higher among older households.
Older adults who immigrated from the former Soviet Union also experience a particularly sharp decline in income after retiring from the labor market, since their income stream includes almost no capital income or pension benefits, having usually arrived with no assets and found it difficult to integrate into the labor market in a way that fully utilized their human capital. In the Arab sector, income in older age is particularly low, perhaps due to low financial literacy and low savings rates.
Older households consume more per person than younger households, even when taking medical expenses into account, although expenditure in households of 75+ is similar to younger households. When examining the distribution of expenses, most – such as apparel and foodstuff- are similar, with the difference mostly stemming from household expenditure. This can be explained by housing density: younger households have, on average, fewer than two rooms per person, whereas older households have more than 2.3 rooms per person.
Tax Payments and Transfers: The database created by Karlinsky, Sadeh, Yogev, and Sarel in 2024 allows for a far more precise measure of the distribution of net transfers for households in the older population. Net transfers are the value of services and transfers received from the government minus tax payments made. When omitting the attribution of public goods (mainly state expenditure on defense, internal security, and infrastructure investment), older households (71+) receive services and transfers of a higher value than the taxes they pay, while all younger households receive net negative transfers. When adding attribution of public goods, all adult households enjoy positive net transfers. Within the sectors, net transfers to older adults from the former Soviet Union are the highest. Households in which the head of household is younger than 65 are characterized by negative net transfers, with the exception of Haredi (ultra-Orthodox) households where the head of household is younger than 55; these are characterized by positive net transfers. When calculating actual net income accounting for all taxes, transfers, and services, (previous estimates included only part of the taxes and only part of the transfers and services) it appears that the average standardized per capita income increases with age. Households aged 75+ receive transfers and services at a value exceeding their tax payments, whereas households aged 65–74 receive negative net transfers.
